COMMUNITY REINVESTMENT ACT PERFORMANCE EVALUATION

[Pages:36]PUBLIC DISCLOSURE

January 4, 2016

COMMUNITY REINVESTMENT ACT PERFORMANCE EVALUATION

METRO CREDIT UNION CERT #: 66364

200 REVERE BEACH PARKWAY CHELSEA, MASSACHUSETTS 02150

Division of Banks 1000 Washington Street Boston, Massachusetts 02118

NOTE:

This document is an evaluation of this institution's record of meeting the credit needs of its entire community, including low- and moderate- income neighborhoods, consistent with safe and sound operation of the institution. This evaluation is not, nor should it be construed as, an assessment of the financial condition of this institution. The rating assigned to this institution does not represent an analysis, conclusion, or opinion of the Division of Banks concerning the safety and soundness of this financial institution.

TABLE OF CONTENTS

I. General Information.............................................................................................................1

II. Institution Rating a. Overall Rating ....................................................................................................................... 2 b. Scope of Exam ...................................................................................................................... 3

III. Performance Context a. Description of the Institution .............................................................................................. 5 b. Description of the Assessment Area................................................................................... 6

IV. Performance Criteria a. Lending Test ....................................................................................................................... 9 b. Investment Test.................................................................................................................20 c. Service Test.......................................................................................................................23

III. Appendix a. General Definitions ............................................................................................................ 30

GENERAL INFORMATION The Community Reinvestment Act ("CRA") requires the Massachusetts Division of Banks ("Division") to use its authority when examining financial institutions subject to their supervision, to assess the institution's record of meeting the credit needs of its community, including low- and moderate-income neighborhoods, consistent with safe and sound operation of the institution. Upon conclusion of such examination, the agency must prepare a written evaluation of the institution's record of meeting the credit needs of its assessment area (AA). This document is an evaluation of the CRA performance of Metro Credit Union (or "the credit union"), prepared by the Division, the institution's supervisory agency, as of January 4, 2016. The agency evaluates performance in assessment area(s), as they are delineated by the institution, rather than individual branches. This assessment area evaluation may include visits to some, but not necessarily all of the institution's branches. The Division rates the CRA performance of an institution consistent with the provisions set forth in 209 CMR 46.00.

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INSTITUTION'S CRA RATING: This institution is rated "High Satisfactory"

An institution in this group has a good record of helping to meet the credit needs of its AA, including low- and moderate-income neighborhoods, in a manner consistent with its resources and capabilities.

The assigned rating is based on the results of three performance tests: the Lending Test, Investment Test and the Service Test. The Credit Union's performance under each of these three tests is summarized below:

The following table indicates the performance level of Metro Credit Union with respect to the Lending, Investment, and Service Tests.

PERFORMANCE LEVELS

METRO CREDIT UNION PERFORMANCE TESTS

Lending Test (*)

Investment Test

Service Test

Outstanding

X

X

High Satisfactory

Satisfactory

X

Needs to Improve

Substantial Noncompliance

* NOTE: The Lending Test is weighted more heavily than the Investment and Service Tests when arriving at an overall rating.

The following factors determine the assigned rating:

Lending Test

Given the credit union's performance context, lending levels reflect good responsiveness to the credit needs of its AA. The credit union made an adequate percentage of loans within its AA during the review period. The geographic distribution of loans reflects good penetration throughout the AA. The distribution of borrowers reflects very good penetration among individuals of different income levels. The credit union is a leader in originating community development loans. During the review period, the credit union originated 29 community development loans totaling approximately $18.7 million. The credit union makes use of innovative and flexible lending programs to assist in meeting the credit needs of its AA.

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Investment Test

Metro Credit Union has an excellent level of qualified community development investments and grants for a credit union. Qualified equity and debt investments total $4.0 million and qualified donations total $175,395. These all consist of new investments during the evaluation period. This is an indication of the credit union's commitment to meeting community development needs by making qualified investments and donations. The credit union has taken the lead in making use of innovative initiatives that are not routinely provided by private investors in the AA.

Service Test

In addition to branch locations, the credit union offers alternative delivery systems that are readily accessible to essentially all portions of its AA. The credit union's record of opening and closing of branches has generally not adversely affected the accessibility of its delivery systems to lowand moderate-income individuals or geographies. The credit union's business hours are consistent with those of other financial institutions and do not vary in a way that inconveniences certain portions of the AA. The credit union also provides an excellent level of community development services in the forms of employee involvement, educational seminars, and additional programs.

Fair Lending or Illegal Credit Practices

A review of the credit union's indirect auto loan portfolio revealed a high fair lending risk as stipulated in the Consumer Financial Protection Bureau's Regulation B, Equal Credit Opportunity Act, and the Division's Regulatory Bulletin 1.3-106 Community Reinvestment and Fair Lending Policy. The credit union's limited procedures in response to the monitoring of these products resulted in a high risk of disparate treatment of certain borrowers.

SCOPE OF EXAMINATION

This evaluation considered the credit union's performance under the Lending, Investment, and Service Tests in accordance with large institution evaluation procedures for activities conducted since the prior evaluation, dated November 19, 2012. The following section details the data evaluated as well as applicable timeframes for each test under large institution procedures.

As reflected in the third quarter (Q3) 2015 Call Report, the credit union's loan portfolio indicates that residential and consumer loans comprise of 64.6 percent and 35.0 percent respectively of the $1.2 billion in total loans. The review of the lending activity in 2014 and the first three quarters in 2015 revealed that during the evaluation period, the credit union has originated 1,381 home mortgage loans totaling $383.3 million and 17,078 small business loans totaling $336.1 million. Therefore, considering the dollar volume of home mortgage loans during the evaluation period and the range of aggregate data available for analysis (see below), slightly greater weight was assigned to residential loans when arriving at overall conclusions and rating under the Lending Test.

The Division analyzed residential loans (data maintained pursuant to the Home Mortgage Disclosure Act data) and consumer loans (CRA data collected by the institution) originated or purchased between January 1, 2014, and September 30, 2015 (YTD 2015).

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The evaluation assigns greater weight to the 2014 lending performance to arrive at conclusions, as the most recent year for which HMDA aggregate lending data is available is 2014. Comparison to aggregate lending data refers to the credit union's HMDA information as it compares to all home mortgage loans originated and purchased within the particular geographic area. The aggregate comparisons in this evaluation include only lenders that reported HMDA data in 2014. No aggregate data is available for consumer loans. Additionally, examiners compared both residential and consumer lending activity from 2014 and YTD 2015 to relevant demographic information in the assessment area. The CRA evaluation also reviewed the credit union's community development loans, innovative or flexible loans, qualified investments (including donations), and services from November 19, 2012, through January 4, 2016.

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PERFORMANCE CONTEXT

Description of Institution

The credit union is a community credit union, incorporated under the laws of the Commonwealth of Massachusetts in 1926. Membership is open to any individuals who live or work in Barnstable, Bristol, Essex, Middlesex, Norfolk, Plymouth, Suffolk, or Worcester County. The credit union's headquarters is at 200 Revere Beach Parkway in Chelsea, and maintains 14 other full service offices in Boston, Chelsea, Burlington, Framingham, Peabody, Salem, Newton, Melrose, and Tewksbury. The credit union also runs two high-school educational branches in Peabody and Chelsea.

Since the prior evaluation, the credit union has merged with Fenwal Credit Union (February 2013) Newton Municipal Credit Union (February 2014), and Malden City Employees Credit Union (October 2015).

As of September 30, 2015, the credit union had total assets of $1.5 billion. The prior evaluation noted total assets of $1.1 billion as of September 30, 2012, which represents a 36.3 percent increase. The credit union's loan portfolio, which represents 82.1 percent of total assets, increased 46.2 percent since the prior evaluation. The following table details the distribution of the Credit Union's loan portfolio as of September 30, 2015.

Loan Portfolio Distribution as of 09/30/2015

Loan Category Unsecured Credit Card Loans All Other Unsecured Loans/Lines of Credit Non-Federally Guaranteed Student Loans New Vehicle Loans Used Vehicle Loans 1st Mortgage Real Estate Loans/Lines of Credit Other Real Estate Loans/Lines of Credit All other Loans/Lines of Credit Total Loans and Leases Source: 09/30/2015 Call Report

$(000s) 30,479 35,007

0 232,789 122,215 481,840 296,227 4,934 1,203,491

% 2.5 2.9 0.0 19.4 10.2 40.0 24.6 0.4 100.0

As shown by the data above, residential loans comprise 64.6 percent of the credit union's portfolio. These loans include closed-end mortgage loans (including junior liens), as well as revolving home equity lines of credit. Consumer loans account for approximately 35.0 percent of the loan portfolio.

The Division last evaluated the credit union's CRA performance on November 19, 2012, which resulted in a rating of "High Satisfactory". There are no apparent financial or legal impediments limiting the credit union's ability to help meet the credit needs of its assessment area. Based upon the credit union's asset size, product offerings, and branch network, the credit union has the capacity to meet credit needs of the area.

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Description of Assessment Area

The CRA requires each financial institution to define one or more assessment areas within which its CRA performance will be evaluated. The credit union has designated it's AA in the CambridgeNewton-Framingham, MA Metropolitan District (MD) (15764) and the Boston MA MD (14454). The credit union's AA conforms to CRA requirements since it consists of whole geographies, does not arbitrarily exclude low- and moderate-income areas, and does not reflect illegal discrimination. The following sections discuss demographic and economic information for the AA.

Economic and Demographic Data Since becoming a community credit union, the chosen AA includes those who live, work, or go to school in the following towns:

Andover Arlington Ashland Bedford Belmont Beverly Billerica Boston Brookline Burlington Cambridge Chelsea

Danvers Everett Framingham Haverhill Lawrence Lexington Lowell Lynn Lynnfield Malden Marblehead Medford

Melrose Methuen Nahant Natick Newton N. Andover N. Reading Peabody Reading Revere Salem Saugus

Somerville Stoneham Swampscott Tewksbury Wakefield Waltham Watertown Wellesley Wilmington Winchester Winthrop Woburn

The overall AA consists of 590 census tracts with the following income designations according to the 2010 U.S. Census:

96 low-income tracts, 147 moderate-income tracts, 193 middle-income tracts, and 142 upper-income tracts.

There are also twelve census tracts with no corresponding income delineation. These census tracts cover the following areas: The Boston Harbor Islands, Franklin Park, the Stony Brook Reservation, the Arnold Arboretum, the Forest Hills Cemetery, the South Boston Reserved Channel, Castle Island, the Suffolk Downs Racetrack, Belle Island Reservation, the Boston Commons, and the Back Bay Fens.

To assess the credit union's lending performance for this evaluation, consideration is given to demographic data in the AA. Refer to table below for pertinent demographic information about the credit union's AA.

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